Home sales may have their worst year in 30 years.
Sales slumped in October and prices continued to climb, as mortgage rates surged last month and inventory remained extraordinarily low. That kept homebuyers out of the market, according to a monthly report from the National Association of Realtors released Tuesday.
Home sales remained at 13-year lows as buyers competed for the few available homes on the market and continued to push up prices. Elevated prices, together with the average rate for a 30-year fixed rate mortgage nearing 8% in October, have created the least affordable market in several decades.
The median price for existing homes — which include single-family homes, townhomes, condominiums and co-ops — climbed to $391,800 last month. That was up 3.4% from a year ago and marked the fourth consecutive month of year-over-year price increases. It was the highest median price on record for the month of October. Prices rose in all four regions of the country, the Northeast, Midwest, South and the West, NAR found.
Higher costs to buy and finance a home pushed sales down to a seasonally adjusted annualized rate of 3.79 million, falling 4.1% from September and a 14.6% from a year ago, according to the report. This fell short of analysts’ expectations for a rate of 3.9 million units sold. Home sales slid from last month in the Northeast, South and West, but were unchanged in the Midwest.
“Prospective home buyers experienced another difficult month due to the persistent lack of housing inventory and the highest mortgage rates in a generation,” said Lawrence Yun, NAR’s chief economist. “Multiple offers, however, are still occurring, especially on starter and mid-priced homes, even as price concessions are happening in the upper end of the market.”
Of the homes sold in October, 28% went above the listing price, which suggests there was a bidding war among would-be buyers.
“There are lingering effects of multiple offers, with more people waiving home inspection and appraisal contingencies,” said Yun. “Given the lack of inventory home sellers are in driver seat, they like the offers that waive those contingencies.”
In October, 24% home buyers waived home inspections, a year ago it was 20%; 21% waived appraisal contingency, compared to 18% a year ago.
Home sales were down in lower priced categories – under $750,000 – due to lack of inventory and sales grew in higher price categories where there was more inventory.
“Where there is more inventory more sales can get done,” said Yun.
Inventory of homes for sale at the end October was 1.15 million units, which was up 1.8% from September. Typical inventory levels prior to the pandemic was about 1.9 million, meaning there were about half the number of homes for sale compared to pre-Covid.
Properties typically remained on the market for 23 days in October, up from 21 days in September 2023 and October 2022. Over half of homes sold in last month were on the market for less than a month.
First-time buyers were responsible for 28% of sales in October.
“First time buyers are still not able to crack above 30% on a consistent basis,” said Yun.
All-cash sales accounted for 29% of transactions in October, unchanged from September but up from 26% in October 2022.
“The lack of inventory and higher interest rates really hitting the home sales market,” said Yun. “Maybe in a couple months we will see some improvement in affordability.”